| Lower refinance home loan rates are raising the | | | | as comparable sales to determine the value of a |
| volume of applications but, will a potential refinance | | | | home for a refinance loan. |
| boom be offset by uncertain home values? Estimates | | | | The mortgage industry is taking steps to ensure more |
| for the fallout of refinance loan applications range from | | | | reliable home valuations. Fannie Mae and Freddie Mac, |
| 50% to 65%, due in part from low appraised home | | | | the largest U.S. mortgage finance companies, have |
| values. | | | | agreed to establish a home appraisal code to help |
| Borrowers with substantial home equity and good | | | | prevent undue influence on appraisers, which has in the |
| credit may be the primary beneficiaries of low <a | | | | past led to artificially high home values, contributing to a |
| rel="nofollow" | | | | record number of foreclosures. |
| onclick="javascript:pageTracker._trackPageview(' | | | | Also, in order to protect against potential loss, FHA has |
| outgoing/article_exit_link');" href=" rates</a>, while | | | | changed their lending guidelines to require that |
| many others could find themselves stuck in their | | | | borrowers pay for two separate appraisals on cash |
| current home loan, unable to refinance because of | | | | out <a rel="nofollow" |
| lower than expected home values. | | | | onclick="javascript:pageTracker._trackPageview(' |
| High expectations of home values can be reduced by | | | | outgoing/article_exit_link');" href=" home loans</a> |
| the reality of appraisals, which determine market value | | | | over 85% loan to value, using the lesser of the two |
| by comparing similar properties recently sold and | | | | values to calculate the maximum loan amount. |
| closed escrow. When a lender takes a refinance | | | | Because home values are such an important issue |
| home loan application, the borrower provides an | | | | when refinancing, lenders should offer to have the local |
| estimate of their home value, which may be just | | | | comps checked, as a courtesy to borrowers prior to |
| wishful thinking, considering market conditions. | | | | spending any appraisal money, since the borrower |
| If any of the recent home sales within a neighborhood | | | | usually pays for the appraisal, just to make sure the |
| are from foreclosures or short sales where the banks | | | | value is close to what is needed in order to fund a |
| have substantially cut the prices for a quicker sale, | | | | refinance home loan. |
| appraisers have no choice but to use those properties | | | | |